Regional distribution effects of different electricity network tariff designs with a distributed generation structure: The case of Germany

Abstract

The growing share of distributed generation and the corresponding need for grid extensions are anticipated to considerably influence electricity grid tariffs in the future. Depending on the regulatory framework and demand structure of the respective country, the necessary expansion measures being taken are disparately affecting different regions. With the underlying public support for the energy system transformation taking place across Europe crucial to its success, mechanisms to facilitate a cost-reflective and non-discriminatory cost distribution should be investigated. Based on a classification of critical factors responsible for regional discrepancies, we model and estimate residential customers’ tariffs in Germany and their regional distributional disparities while assessing various reform measures. The findings show that the overall tariff rates in Germany and the already existing regional disparities are poised to increase substantially by 2025. A tariff corridor and deep first connection charges considerably limit tariffs and increase distributional equity amongst regions. A generation tariff alters the distribution and reduces the highest tariffs. An energy-based tariff that neglects the impact of prosumers further aggravates the regional distributional disparities. This paper gives insights into the challenges of cost allocation within electricity grids and intends to help to design an adequate and fair cost allocation mechanism.